Midwest Capital Corp.: offering a longer-term mortgage at higher loan-to-value.

• Author: Kronemyer, Bob
• Position: VENTURE

MANY SMALL AND medium-size businesses have increased their cash flow, thanks to long-term financing through Midwest Capital Corp. in Greenwood.

"We provide financing from $500,000 to $5 million," says founder and president Steven Young. "We are a highly competitive alternative to traditional bank financing. Banks typically use a short-term credit model to make lending decisions. Our money comes from longterm investors, so we can offer a longer-term mortgage at a higher loan- to-value."

Midwest Capital started in 2000 and most of its loans are originated for customers in central Indiana, although the company has the capacity to lend outside of the state.

This month, the privately owned enterprise is scheduled to move its single location to Fishers. "We feel we can better serve our market by moving. Most of our referral base is on the north side of Indianapolis," says Young, who for the past 19 years has specialized in loans to small and medium-size companies. "This year we will produce about $25 million in funding," Young notes. "This represents about a 100 percent increase over last year."

Young, who was previously based out of Indianapolis as a regional sales manager for First Union National Bank, says his own company is able to provide more financing options. "Most of our borrowers don't peg a lot of their decisions based on the performance of the stock market," he explains. "However, interest rates obviously have a big impact on our programs. Right now, with a flattened yield curve, long-term rates are as attractive as short-term rates. Typically, the longer you lock a rate, the more expensive that money becomes."

Midwest Capital's most popular product is a 25-year, fixed-interest loan. "Our long-term rates are pretty close to what a borrower would get at the bank for a prime-based loan," Young says. "A lot of commercial banks offer a similar type loan as we do, at a spread over the U.S. prime rate. The U.S. prime rate has gone up 12 times in the past 24 months (as of mid-October), but long-term rates have been extremely slow to change in relative terms. Historically, this is unusual."

The company secures funding through institutional lenders, referred to as the Secondary Market. "This market is looking for opportunities to place funds into long-term, commercial real estate-backed loans," Young notes.

Recently Midwest Capital refinanced a Small Business Administration (SBA) mortgage on a building in northern Indiana where a dentist is in...